My baseline scenario for the U.S. included a rapid increase in the number of
multifamily housing units and a general return to renting.

However, a few factors are combining to make me think that an alternate
scenario, one in which the single-family housing bubble returns, is
increasingly likely.

First, multifamily starts simply aren't increasing as fast I thought they
would. This means that rent pressure will be even more severe, and quite plainly
there simply won't be enough apartments to absorb all of the newly forming
families.

Second, no permanent solution to the global savings glut has been offered, and
with austerity across Europe and deficit cutting on the agenda for the United
States, the fundamental problems will only increase.

Third, Fannie Mae and Freddie Mac are considering bulk sales of foreclosed properties
that will potentially slow the stream of distressed properties onto the
market.

All of these factors combined mean that single-family home prices may
stabilize in the near future. However, given the dynamics in the credit markets,
stable prices do not seem like an equilibrium. Once prices stabilize the
incentive to begin massively expanding credit to potential borrowers will be
enormous and is likely to reignite.

I would tend to think it's unlikely that we will get the kind of price
appreciation we saw the first time around. However, it is not impossible, and it's
certainly possible to get a strong uptick in construction.

Also, I'd like to point out now that while a return of the housing bubble
would prompt concerns that regulation has not gone far enough to curb abusive
lending practices, it is not clear to me that any regulation would successfully
stop this process.